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ECON 103:
Economic Principles
and Problems
GEOFF SCHNEIDER
Assistant Professor of
Economics
Bucknell University, Fall 2002
Karl Marx
1818-1883
Adam Smith
1723-1790
PROF. SCHNEIDER’S OFFICE HOURS: M W F 11-12, T 2-3 and by appointment.
Office: 171 Coleman Hall. Office Phone: 577-3446.
Email address: GSCHNEDR@bucknell.edu. Web page: http://www.facstaff.bucknell.edu/gschnedr/
Teaching Assistants: Lindsey Goldstein and Adam Hoffman. Teaching assistant office hours will be
announced the second week of class.
Class Meetings
Classes meet on Monday, Wednesday and Friday. Films and Exams are scheduled for Wednesdays
7:00-8:30 PM in Vaughan Lit. Auditorium. There will also be an additional showing of films at 4:00
PM on Wednesdays. For those people with Wednesday evening conflicts, exams will be rescheduled
by prior arrangement with Prof. Schneider.
Course Description
This course will provide an introduction to modern microeconomics, macroeconomics, international
economics and political economy. It will acquaint you with the prevailing economic theories used by
today’s policy makers. You will learn to use and apply those theories, as well as to understand their
limitations and shortcomings. We will discuss a number of alternative economic theories and
perspectives, with the ultimate goal being to increase your awareness and understanding of economic
issues, to improve your ability to evaluate various policy options, and to help you decipher politicaleconomic rhetoric. The overall purpose of this course is to acquaint you with basic principles of
economic analysis and to engage in a substantive
critique of our current global economic system.
Since much of economics is concerned with
solving the economic problems that exist in
society, a significant portion of our time will be
devoted to studying what various economists think
are the major problems confronting the US
economy, and what solutions to these problems
economists have to offer.
Thorstein Veblen
1857-1929
A General Note About This Class
Economics is a subject which comes easily to
some students but is difficult for others. Economic
logic and analysis is often hard to grasp, and can
John Maynard Keynes
1883-1946
only be mastered through perseverance and practice. To facilitate the learning of economics, it is
necessary to keep up with readings, work on problem sets, participate actively in discussions, and write
thoughtfully about films and current events. The combination of these approaches to learning
economics (reading, analyzing problems, interacting as a class, and writing) should help improve your
understanding of the field as well as your performance on exams. Since each new section in this
course builds on previous sections, it is extremely important that you do not fall behind. This course
involves a significant amount of work, but in my experience the workload is both manageable and
necessary for you to get a firm grasp of the material.
Texts
1. Riddell, Shackelford, Stamos and Schneider (RSSS). Economics: A Tool For Critically
Understanding Society, Sixth Edition. New York, N.Y.: Addison Wesley, 2002.
2. Sackrey, Schneider and Knoedler (SSK). Introduction to Political Economy, Second Edition.
Somerville, Mass.: Dollars and Sense, 2002.
3. Zinn, Howard. A People's History of the United States, Abridged Edition. New York:
HarperCollins, 1997.
4. Electronic Reserve Readings: there will be regular readings on electronic reserve at the library
home page. Electronic Reserves are available via the internet from any campus computer. The ereserve password for this course is: adamsmith (one word, no caps).
5. Email Readings: as important economic events occur, I will frequently email topical articles to
you. You will need to check your email daily and read the articles I send to you.
6. The New York Times, Internet Edition. We will be discussing current economic events
throughout the semester. You will need to keep up with the news on a regular basis, because you
will be asked to apply the theories we discuss in class to the contemporary economic world around
us. As soon as possible, visit the New York Times web site at http://www.nytimes.com/. Sign up
for an online subscription, which is free. Check the newspaper daily for current economic events.
There are three main texts for the course, 1) Riddell, Shackelford, Stamos and Schneider (RSSS), 2)
Sackrey, Schneider and Knoedler (SSK), and 3) Zinn. There are also a number of readings on
electronic reserve at the library. The electronic reserves, Zinn and the SSK book explore economic
issues and debates, while the RSSS book covers the basic parameters of the debates as well as the
graphs and technical topics we will be studying. You should read the relevant passages in your texts
before we go over the material in class. This will help you immensely in understanding the topics
being covered and it will also help to identify the areas you find confusing so that we can spend more
time on them in class. Assigned articles and chapters will be used as a basis for discussion in class on
the day they are listed.
You can find electronic reserve documents through the Bucknell library home page. Most of the
readings will be in the folder Shared Readings for Econ103, although some will be in the folder under
my name. Old exams are also available on electronic reserve. There is a password for e-reserve
documents. As noted above, the password is “adamsmith” (all one word, no caps).
Grading
Analytical Paper
Exam 1
Exam 2
Exam 3
Homework Assignments
15%
12%
24%
24%
25%
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Analytical Paper (15%): You will write one paper during the first part of the semester. In the paper
you will be asked to analyze the economic issues discussed in the readings and films. Your paper
should be clearly written and the analysis must be original, carefully thought out, and effectively
supported with examples. Whatever you choose to write about, do NOT simply summarize the films
and readings. The purpose of this paper is for you to demonstrate the ability to critically evaluate the
content of the readings and films, and to make connections between these materials and the ideas we
discuss in class. Your paper should be 4-5 pages in length (typed, double-spaced, 1 inch margins, 12
point Times New Roman font). Your paper may not exceed 5 pages in length, so be concise.
Exams (60%): There will be three examinations over the course of the semester. Exam 1 is a short
test on the productions possibilities and supply and demand models that is worth 12% of your grade.
There will be no essay question on exam 1. Exams 2 and 3 are each worth 24% of your grade. As
with exam 1, there will be questions involving graphical analysis along with short answer questions
requiring some explanation. Exams 2 and 3 will also feature a long essay question on films and
readings. On the essay questions, I will be looking for the same kind of critical analysis that you are to
include in your paper. The best way to prepare for exams is to go over the homework
assignments. The homework assignments are designed to prepare you for the tests. In fact, many of
the problems on homework assignments are taken from past exams. The answers to most homework
assignments will be placed on electronic reserve so you can study them.
Homework Problems (25%): There will be thirty three (33) daily homework assignments distributed
during the course of the semester. Most days that you have class you will have a short assignment that
is due at the beginning of class. You must turn in at least 25 of these 33 assignments. You may work
together on parts of these assignments (the technical problems, such as the graphs and tables), but you
may not copy each other verbatim (i.e., you may work together on an approach to a problem but you
may not write up your final answers together). Also, you may not work together on the problems that
require you to comment on the readings. Because you are allowed to miss up to 8 assignments, LATE
ASSIGNMENTS WILL NOT BE ACCEPTED. You may turn in more than 25 of the assignments
for extra credit.
Extra credit policy: Each homework assignment you turn in after #25 will earn you up to 20 bonus
points to be applied towards your homework score. I will take your score on each extra homework
assignment, divide it by 5, and then add that number of points to your homework score. I have found
that this method has a greater positive impact on your overall grade than just replacing a lower
homework grade with a higher homework grade. This means that you can easily bring up your
homework average by turning in a few extra assignments, and that you can earn greater than a perfect
score on your homework grade if you are particularly diligent.
Keep an extra copy of each of your homework assignments to study from. Because of the
volume of assignments, it will usually take us a couple of weeks to return materials to you. Make sure
that you have an extra copy of each homework assignment that you turn in to study from.
Class Participation and Attendance will be used to determine if students on the borderline between
two grades receive the higher or lower grade. Attendance is required. More than one unexcused
absence will result in a lower grade in the class.
 All items will be graded on the following scale: A: 92-100, A-: 90-91, B+: 88-89, B: 82-87, B-:
80-81, C+: 78-79, C: 72-77, C-: 70-71, D: 60-69, F: 0-59.
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Course Calendar
DATE
TOPIC
1. W Aug. 28
Introduction
Readings: 1) Syllabus.
W Aug. 28, 4PM, 7PM No film
Section I: Economic Approaches, Philosophies and Systems
The first section of the course addresses the following questions: (1) What is the proper method for studying the
economy? (2) What have four of the greatest economic philosophers, Smith, Marx, Veblen and Keynes, said about
economics? and (3) What types of economic systems are there in the world today, and how do they differ from each
other? In this part of the course it is very important to keep an open mind. All of the perspectives we study have
their merits, and you need to appreciate and understand the strengths and weaknesses of each of them. It is also
important during this first part of the course to develop your critical analysis. Work on evaluating everything you
read, develop your own ideas on each subject, and then be able to support your ideas and opinions with examples,
data, and logical analysis. The analytical paper, due Monday, September 23 rd, will test your ability to assimilate,
apply and analyze the key ideas from the first section of the course. The homework assignments during this part of
the course will help to prepare you for the paper by stimulating your critical thinking and prompting you to react to
various materials. You should be able to use sections of your answers to homework questions in your paper.
2. F Aug. 30
What is economics?
Readings: 1) RSSS Ch. 1. 2) SSK, “Political Economy Critique of Mainstream Economics.” 3) RSSS Ch. 7.
3. M Sept. 2
Feudalism, Mercantilism and Early Capitalism
Readings: 1) RSSS Ch. 3. 2) Zinn Ch. 1.
4. W Sept. 4
Adam Smith and Laissez-Faire
Readings: 1) Jensen, “Adam Smith” (e-reserve). 2) RSSS Ch. 4 and pp. 82-90.
W Sept. 4, 4PM, 7PM
Film: Greed with John Stossel
Readings: “A Note on the Film Series” (syllabus).
5. F Sept. 6
Capitalism, Socialism and Karl Marx
Readings: 1) SSK, “The Marxist System.” 2) RSSS pp. 90-96.
6. M Sept. 9
Social Class
Readings: 1) SSK, “Social Class.” 2) Frank, “The Victimless Income Gap?” (e-reserve). 3) Zinn Ch. 2.
7. W Sept. 11
Thorstein Veblen on Predatory Behavior and Conspicuous Consumption
Readings: 1) SSK, “Veblen on the Predatory Nature of Capitalism.” 2) Cassidy, “No Satisfaction” (e-reserve).
W Sept. 11, 4PM, 7PM Film: Free Trade Slaves
Readings: 1) RSSS pp. 41-44. 2) Goldberg, “Sweatshop Chic” (e-reserve).
8. F Sept. 13
John Maynard Keynes and Macroeconomics
Readings: 1) SSK, “John Maynard Keynes.” 2) Zinn Ch. 3 and pp. 237-239, 250.
9. M Sept. 16
Economic Systems
Readings: 1) SSK, “The Middle Way.” 2) Rohlf, “Mixed Economies” (e-reserve).
10. W Sept. 18
The US Economic System According to Howard Zinn
Readings: 1) Zinn Ch. 4-7.
W Sept. 18, 4 PM,7PM Film: Affluenza
Section II: Supply and Demand
The second section of the course develops the supply and demand model that is the cornerstone of modern
neoclassical economics. This section is very graph-intensive, and those of you who have difficulty with quantitative
analysis and/or working with graphs will need to spend extra time on this material. The key to understanding the
supply and demand model is practicing its use. In addition to working through the homework assignments, you
should practice on your own or with your fellow students. Just because it makes sense in class does not mean that
you do not need to practice solving problems on your own. If you are able to do the homework assignments without
your notes or to design and solve your own supply and demand problems, then you probably have a good
understanding of the material. Exam #1 will test your understanding of the supply and demand model as well as the
production possibilities model covered earlier in the semester. Old exams are available on electronic reserve to help
you prepare for this test.
11. F Sept. 20
Supply (S) and Demand (D)
Readings: 1) RSSS Ch. 8.
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12. M Sept. 23
Supply (S) and Demand (D), Continued
Readings: 1) RSSS Ch. 8.
PAPER IS DUE IN CLASS.
13. W Sept. 25
S & D, Price Supports and Price Ceilings
Readings: 1) Wartzman, “Falling Behind” (e-reserve). 2) RSSS, “Economics of the minimum wage” (pp. 223-6).
W Sept. 25, 4 PM,7PM Film: Rollover: The Hidden History of the SUV
14. F Sept. 27
Elasticity of Demand and Advertising
Readings: 1) Leonhardt, “Hey Kid, Buy This!” (e-reserve). 2)Will, “Schools Should Be Commerce-Free Zones”
(e-reserve). 3) RSSS Ch. 8 pp. 152-157.
15. M Sept. 30
Applications of Supply, Demand: Exchange Rates
Readings: 1) RSSS Ch. 8, “Supply, Demand and the Value of the Dollar” (pp. 150-151).
16. W Oct. 2
Review
W Oct. 2, 7-9:00 PM
Exam #1 (Location To Be Announced)
Section III: Theory of the Firm, Market Structures, and Market Failure
This section of the course explores how firms operate in theory and practice. The graphs and tables used in this part
of the course are more difficult than supply and demand graphs, and will require significant practice to master. As
before, the key to learning this material is coming to class, reading the book, and then practicing what you have
learned on the homework assignments. While the graphs explore how firms work according to neoclassical
economic theory, the films, articles and readings from Zinn explore how firms operate (or have operated) in
practice. The segment on market failure will address the key economic question: When (and how) should firms be
regulated? Both the theory and the case studies are crucial for your understanding of this topic. Exam #2 will
contain questions which test your ability to understand the theory (including graphs and tables) as well as short
answer and essay questions on the readings and films.
17. F Oct. 4
Production and Supply
Readings: 1) RSSS Ch. 9.
18. M Oct. 7
Production and Supply, Perfect Competition
Readings: 1) RSSS Ch. 9. 2) Zinn pp. 113-117 and Ch. 9.
19. W Oct. 9
Applications of Perfect Competition/Perfect Competition in the Long Run
Readings: 1) RSSS Ch. 9, pp. 179-188. 2) Zinn Ch. 10.
W Oct. 9, 4PM, 7PM
Film: Store Wars
20. F Oct. 11
Market Power, Monopoly
Readings: 1) RSSS Ch. 10 pp. 191-196.
21. M Oct. 14
Regulating Monopoly
Readings: 1) Zinn Ch. 11-12. 2) Schneider, “Regulating a Natural Monopoly” (e-reserve). 3) RSSS pp. 198-199.
22. W Oct. 16
Non-Competitive Markets: Monopolistic Competition and Oligopoly
Readings: 1) RSSS Ch. 10 pp. 199-216.
W Oct. 16, 4PM, 7PM
Film: Taken For A Ride
23. F Oct. 18
Market Failure 1: Corporations and their behavior/The Role of Unions
Readings: 1) Sherrill, “White-Collar Thuggery” (e-reserve). 2) RSSS Ch. 12.
Fall Break, October 19-22
24. W Oct. 23
Market Failure 2: Economic Concentration, Antitrust, & Regulation
Readings: 1) Cassidy, “Rich Man, Richer Man” (e-reserve). 2) RSSS pp. 281-285.
W Oct. 23, 4PM, 7PM
Film: Money For Nothing: Behind the Business of Pop Music
25. F Oct. 25
Market Failure 3: Inequality & Poverty
Readings: 1) Cassidy, “Who Killed the Middle Class” (e-reserve). 2) RSSS pp. 226-240, 285-287, 292-298.
3) Albelda, “What Welfare Reform Has Wrought” (e-reserve).
26. M Oct. 28
Market Failure 4: Externalities, Public Goods & the Role & Size of Govt.
Readings: 1) RSSS pp. 266-281, 288-289. 2) SSK, “Galbraith and Theory of Social Balance.”
27. W Oct. 30
Review
W Oct. 30, 7-9:00 PM
Exam #2, (Location To Be Announced)
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Section IV: Macroeconomics and International Economics
This section of the course explores the macroeconomic side of the economy, concentrating on the forces that drive
the economy as a whole. You will discover that the macroeconomy operates under somewhat different principles
than do most microeconomic markets. It is particularly important to study the nuances of Aggregate Demand and
Supply, which is a more complicated model than the microeconomic supply and demand model we saw earlier in the
semester. Also, pay close attention to the different macroeconomic schools of thought. There is widespread
disagreement about how we should run the macroeconomy, so a significant portion of this part of the course is
devoted to macroeconomic policy debates. Exam #3 will be scheduled for the regular final exam time for this
course. It will only cover the material after exam #2, and it will contain short answer, graphing, and essay questions.
28. F Nov. 1
Unemployment, Inflation and GDP
Readings: 1) RSSS Ch. 14 . 2) Zinn Ch. 15.
29. M Nov. 4
Underemployment and the Reserve Army
Readings: 1) Schwarz, “The Hidden Side of the Clinton Economy” (e-reserve). 2) Pollin, “The Natural Rate of
Unemployment: It's All About Class Conflict” (e-reserve). 3) Zinn Ch. 17.
30. W Nov. 6
Aggregate Demand & Supply
Readings: 1) Schneider, “Aggregate Demand and Supply” (e-reserve). 2) Zinn Ch. 18. 3) RSSS Ch. 18 pp. 417428.
W Nov. 6, 4PM, 7PM
Film: Living on the Edge
31. F Nov. 8
The Keynesian and Classical Models of the Macroeconomy
Readings: 1) RSSS pp. 327-336. 2) Zinn Ch. 21.
32. M Nov. 11
Aggregate Demand, Aggregate Supply, and the Multiplier
Readings: 1) Schneider, “Aggregated Demand and Supply” (e-reserve). 2) Zinn Ch. 22.
33. W Nov. 13
Fiscal Policy & Budget Deficits/Money
Readings: 1) RSSS Ch. 16.
W Nov. 13, 4PM, 7PM Film: Dot Con
34. F Nov. 15
Money, Banking and Monetary Policy
Readings: 1) RSSS Ch. 17.
35. M Nov. 18
Monetarism and the Debate Over Monetary Policy
Readings: 1) Thurow, “Crusade That’s Killing Prosperity” (e-reserve). 2) Eisner, “The Problem With the Natural
Rate of Unemployment” (e-reserve). 3) Krugman, “Greenspan's Candor” (e-reserve). 4) Cramer,
“Spoon Fed: What Greenspan Is Doing Wrong” (e-reserve).
36. W Nov. 20
Macro Policy Debates I: Monetarist, New Classical & Supply-Side Approaches
Readings: 1) RSSS pp. 401-403, 428-434, and 445-446. 2) “Friedman Opposes Stimulus Package (e-reserve).
W Nov. 20, 4PM, 7PM Film: Beating the Bottom Line (Surviving the Bottom Line, part 4)
37. F Nov. 22
MPD II: Keynesian, Feminist, Managed Capitalist & Dem. Socialist Approaches
Readings: 1) RSSS pp. 445-449. 2) Zinn Ch. 23. 3) Schneider and Shackelford, “Ten Principles of Feminist
Economics” (e-reserve). 4) “Even Free Money May Not Do The Trick” (e-reserve).
38. M Nov. 25
Globalization & Comparative Advantage
Readings: 1) RSSS Ch. 20.
Thanksgiving Break, November 27-December 1
39. M Dec. 2
The Arguments For and Against Unregulated Trade
Readings: 1) RSSS Ch. 2.
40. W Dec. 4
International Finance I: Exchange Rates
Readings: 1) RSSS Ch. 21.
W Dec. 4, 4PM, 7PM
Film: Trading Democracy
41. F Dec. 6
International Finance II: The Balance of Trade and Payments
Readings: 1) RSSS Ch. 21.
42. M Dec. 9
The US Economy and Where It Is Headed
Readings: 1) Zinn “Afterword: On the Clinton Presidency.”
To Be Announced
Exam #3 Time and Date Scheduled at the Final Exam Time for This Course
E-Reserve = On Electronic Reserve at the library web-site (see details above).
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A Note on the Economics 103 Film Series
To begin with, books alone cannot adequately introduce students to the US economic system, nor to the world
economy in which it is integrated. Beyond words on a flat page in an open book is a world of sounds, smells, colors,
pains and joys, the full expressions of which simply are lost to the printed word. When one discusses the “economy,”
one refers to the basic fact of human culture: people trying to make a living, often with sound and fury. Thus, we add
to the books, and to our discussion in Economics 103, a series of films reminding us that economics is about human
beings.
Students in Economics 103 often consider some of these films as “one-sided,” or “propagandistic,” and we
should address this matter at the outset. Propaganda means, generally, the dissemination of ideas from a particular
point of view about how the world is, and should be. One reason for this student attitude about 103 films is that most
are documentaries, where, unlike typical commercial films, the film makers' views about the subject are easily
identified. Yet, all films, from commercial comedies to sophisticated documentaries, inevitably manipulate the ideas
and feelings of the audience, even those whose makers believe their films have no point of view whatsoever. Why?
Because film makers typically shoot many, many more hours of film than they end up using in the final cut of their
movie. Thus, each frame that makes it into a film is selected only if it helps to tell a unique and specific story, rather
than the virtually infinite number of other stories that might have been told with the same footage.
Concerning documentaries first of all, consider hypothetically a film about John F. Kennedy that claims
Kennedy was never elected US president. This claim is obviously a blatant falsehood. However, consider (still
hypothetically) a second documentary confirming that Kennedy was president but also suggesting that he was more
driven personally to make sexual conquests than he was (say) to improve substantially the lot of poor people--an idea
for which there is conflicting evidence. This second film does not blatantly lie, but it does interpret the known facts
from a particular point of view. And, that is the main point: any documentary or historical film that is not blatantly
false necessarily mixes together undisputed facts and disputable interpretations. Again, this is simply intrinsic to film
making.
Since commercial films do not call attention to their makers' point of view, we tend to concentrate our
attention on their surface details (plot, acting, action, etc.). With our attention focused this way, we ignore at a
conscious level the values and beliefs commercial films inevitably encourage, and we can mistakenly consider them
works of pure entertainment devoid of a point of view. Take, for instance, most Hollywood films about the American
West, where the land, Indians, cattle, and women are props used to define the character of one-dimensional, tough
white guys. Obviously, a strong message is buried beneath the dust and the blood of these films about who is, and
should be, in control. Chances are that most people who watch Westerns consider them as harmless entertainment, and
they are not likely to worry that they are being influenced to think a particular way about how men should treat the
planet, its women and its native populations. However, such films typically disseminate a manipulative, one-sided
view of how the world is and it should be; that is, they are powerfully propagandistic.
To consider commercial films more closely related to the themes of Economics 103, Hollywood has in the past
two decades made countless fictional movies, with such stars as Clint Eastwood, Bruce Willis and Mel Gibson
depicting hard boiled detectives shooting and corralling urban bad guys. These films have responded to the public's
demand for more law and order in every facet of American life. Yet, such films typically champion the perspective of
the police; and more problematic, they almost always focus attention on individual bad guys--mostly bad guys of color-rather than on larger social forces or the powerful individuals who shape them. What happens is that Hollywood
creates a simplistic world in which urban crime is solved by heroic cops, rather than by other, greatly more complicated
and costly solutions. Think of how often in this kind of film the bad guys are young males, compared to those made
which point the finger at older males--such as the managers of major corporations who have eliminated or exported
abroad hundreds of thousands of urban jobs, or at politicians who have quit attending to the needs of people in central
cities simply because most voters don't live there.
To exemplify some of comments above, consider this semester's second film, “Free Trade Slaves.” This
documentary focuses on sweatshop workers, whose wages are so low that they do not have enough to eat. The makers
of this film clearly think that the problems of these workers are in part determined by those who manage multinational
firms that now dominate the global economy. Thus, in a way, the film is a negative critique of those managers. No
doubt, a film maker who addressed this topic from a “laissez-faire” point of view, such as our first film “Greed,” would
have placed the blame somewhere else, such as on misguided government policies or on the workers themselves.
Last, if you conclude that some of the 103 films are one sided, you may only be saying that they are, in fact,
films. Beyond that, try to use the films, and especially the ones that sharply disagree with your own view, as a way to
ask yourself why you and the film maker see things so very differently.
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